IMPORTER'S GUIDE TO U.S.

CUSTOMS
CLEARANCE OF IMPORTED GOODS

DANIEL MARK OGDEN

Attorney & Counselor at Law
Licensed Customs Broke
International Trade Consultant
1925 E. Belt Line Rd., Suite 516
Carrollton, Texas 75006
(972) 417–1916 (voice)
(775) 535-1548 (fax)
www.internationaltradeattorney.com
daniel.ogden@internationaltradeattorney.com

© Daniel Mark Ogden, 1993–2008. All Rights Reserved.

The United States Customs Service (part of the Bureau of Customs and Border
Protection) is charged by law to regulate the importation or entry of goods into the Customs
territory of the United States. U.S. Customs territory includes all 50 states, D.C., and Puerto
Rico. The two most important issues for importers to understand regarding the clearance of
imports through U.S. Customs are the entry process for imported goods, and the duty
determination process by which the amount of the import duty (or tariff) is determined.
Additionally, the relief available for importers in response to U.S. Customs actions and rulings is
also an important issue of which importers should be aware.

A. Entry Process

All goods which are imported into U.S. Customs territory must undergo a legal process
called entry in order to be clear Customs and legally be imported into the U.S. Entry of imported
goods into U.S. Customs territory does not legally occur until the import has arrived at the U.S.
port of entry, Customs has authorized the entry of the goods, and any estimated duties owed
on the goods have been paid. Imported goods are said to have cleared Customs when the
goods have been successfully undergone entry.

When imported goods physically arrive within U.S. Customs territory, entry documents
must be filed with U.S. Customs before Customs will release the goods. Once the goods arrive
and are presented for entry, and the goods are either examined by Customs or examination is
waived, Customs will release the goods upon either the filing of certain required entry
documents or the filing of an entry summary, provided that no legal violations pertaining to the
imported goods have occurred. If release is sought on the basis of the filing of the entry
documents only and not the entry summary (which includes a deposit of estimated duties), then
Customs will not release the goods unless a bond sufficient to cover any estimated duties has
been posted by the person making the entry. Note that even after the release of the imported
goods by Customs, however, Customs still has jurisdiction over the goods until the entry of the
goods has been liquidated by Customs.

1. Right to Make An Entry

Imported goods may only be entered by persons who have the legal authority to enter
such goods. There are three types of such persons.

a. Importer of record

The person who has documentary legal title to the goods when they physically arrive in

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U.S. Customs territory. A person has documentary title when they are the person listed on the
bill of lading or the waybill as the consignee. This person could be the U.S. buyer (usually), the
U.S. buyer's agent, the foreign seller, or the foreign seller's agent. A foreign seller is classified
as the importer of record when title to the imported goods does not actually pass from the
foreign seller to a U.S. buyer until after the goods have already arrived within U.S. Customs
territory. In all instances, the importer of record is always liable for the payments of any duties
owed on the imported goods.

b. Ultimate Purchaser

The person who is the ultimate purchaser of the goods after they arrive within U.S.
Customs territory, even if such person is not the importer of record. Usually a person is the
ultimate purchaser but not the importer of record when that person imports goods through an
import agent whose name is listed on the bill of lading as the consignee.

c. Licensed Customs Brokers

Persons who are licensed by the U.S. Customs Service to serves as agents for
importers of record or purchasers by entering and clearing goods through U.S. Customs. While
customs brokers are not legally required to be used in order to enter goods through U.S.
Customs, nevertheless because of their specialized expertise it is desirable in most
circumstances to employ their use. If a customs broker is used to enter imported goods, the
importer must provide the broker with a power of attorney authorizing the broker to engage in
such activity.

2. Forms of Entry

There are several different forms of entry categorized by the intended purpose of the
entry, each having their own requirements.

a. Consumption Entry

The most common form of entry, consumption entries are used whenever imported
goods are to be “consumed” or used by the ultimate purchaser within U.S. Customs territory

b. Transportation Entry

This entry is used when imported goods are transported within the U.S. to another U.S.
port of entry where they will then undergo a consumption entry, or when imported goods are
transported through the U.S. from one country to another (e.g. Canada to Mexico). Although the
goods are physically within U.S. Customs territory, they are not legally entered into U.S.
Customs territory and therefore may not be “consumed” without undergoing a consumption
entry. The goods must be sealed in the transportation carrier by Customs and may not be
unsealed before undergoing a consumption entry.

c. Temporary Importation Under Bond Entry (TIB)

This form of entry is used when goods are imported temporarily into the U.S. under
bond. Only certain goods are eligible for this entry. TIB entries are valid for one year after which
the goods must undergo a consumption entry, be re-exported from U.S. Customs territory, or
be destroyed. A failure to perform one of the foregoing will result in forfeiture of the bond (which
generally is around twice the estimated dutiable value of the goods).

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d. Warehouse Entry

This form of entry is used when goods are imported into a Customs approved bonded
warehouse. The goods may reside in the bonded warehouse for up to five years after which the
goods must undergo a consumption entry, be re-exported from U.S. Customs territory, or be
destroyed. If the goods physically leave the bonded warehouse before this five year period
expires, they must then undergo a consumption entry, a transportation entry, or be re-exported
from U.S. Customs territory.

e. Foreign Trade Zone Entry (FTZ)

This form of entry is used when goods are imported into a foreign trade zone. The
goods may reside in the FTZ indefinitely. If the goods leave the FTZ, however, they must
undergo a consumption entry, a transportation entry, a warehouse entry, or be re-exported from
U.S. Customs territory.

f. Drawback Entry

This form of entry is used when a duty drawback is claimed on goods that are imported
into U.S. Customs territory and then are re-exported from U.S. Customs territory. A drawback
entry must be filed within three years of the date of exportation.

g. Appraisement Entry

This form of entry is used for certain specialized categories of goods that are imported
into U.S. Customs territory.

h. Mail Entry

This form of entry is used when items such as parcels, letters, packages, boxes, or
similar articles are imported into U.S. Customs territory through U.S. mail. These entries may
either be formal or informal entries.

i. Informal Entry

This last form of entry has less stringent requirements than formal entries (which include
all of the above forms of entry). Imported goods may be entered informally when (1) they have
a dutiable value of less than $2500, (2) they are of a certain class of goods which are entitled to
entry free of duty, (3) they are certain other classes of goods, or (4) they are goods of U.S.
origin that were originally exported from U.S. Customs territory and are being re-imported back
into U.S. Customs territory solely for the purposes of repair or alteration prior to a re-
exportation.

3. Documents Required to be Filed For Entry

The process of entry requires that certain documents be filed with U.S. Customs. Some
of the most important of these documents include the following:

a. Evidence of Right to Make Entry

One of the two following documents must be filed with U.S. Customs evidencing that the
person making the entry has a legal right to make such an entry–

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 1) a bill of lading showing the importer of record as the consignee; or

2) a carrier's certificate that is used when the bill of lading is not used or available and
is a certification by the carrier that the person making the entry has documentary
title to the goods or is authorized by such person as an agent to make the entry.

This document must be filed with U.S. Customs within five days of date of arrival of the
imported goods into U.S. Customs territory.

b. Invoice

U.S. Customs uses invoices primarily to determine the duty to be assessed on the
imported goods. One of two types of invoices must be filed–

1) a commercial invoice, which has specific requirements as to certain

information which must be included such as the port of entry, the names and
addresses of seller and buyer, a detailed description of the imported goods,
the country of origin, the charges for the goods, the currency of sale, and
other pertinent information; or

2) a proforma invoice, which may be used only when a commercial invoice can
not be produced at time of entry. If a proforma invoice is filed, then a
commercial invoice must be filed not later than 120 days from the date of
entry.

This document must also be filed with U.S. Customs within five days of date of arrival of
the imported goods into U.S. Customs territory.

c. Entry Summary

This document, Customs Form 7501, must be filed within ten days of Customs' release
of the imported goods, along with a deposit of the estimated duties on the goods. Other
documents required to be filed at the same time as the entry summary are the entry package
returned by U.S. Customs to the person making the entry after Customs releases the goods,
and any other documentation necessary to prove that any Customs requirements have been
satisfied.

d. Immediate Delivery

In certain unique circumstances, the usual entry process may be circumvented by filing
Customs Form 3461, which is a Special Permit for Immediate Delivery. This document should
be filed prior to the arrival of the goods into U.S. Customs territory. If Customs approves the
filing, then the imported goods are released shortly after their arrival. Note, however, that the
entry summary along with a deposit of the estimated duties owed must still be filed within ten
days of release.

4. Entry Liquidation

Entries of imported goods into U.S. Customs territory are liquidated when Customs has
issued final approval of the entry documentation, the classification of the imported
merchandise, the duty rate on the imported merchandise and the amount of duty actually paid.
Quite often, liquidation occurs upon the filing of the entry summary and all required
documentation. Notice of liquidated entries is provided by the posting by Customs of a public

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notice at the local Customs' office. If Customs does not approve of the filed entry summary,
however, due to such matters as an incorrect classification or an insufficient incorrect deposit of
duties, then the importer of record will receive a notice from Customs detailing the problem. If
this notice is not responded to by the importer, then the entry is liquidated and the importer
billed for any extra duty owed. Following the liquidation of an entry, if the importer of record is
dissatisfied with some aspect of the liquidation, the importer has ninety days to file a protest
with either the local Customs port director of the local Customs district director, or to request an
administrative ruling by Customs headquarters in Washington, D.C. Once the time for any
protest or administrative ruling request has expired, or if a timely filed protest or administrative
ruling request has been finally denied, liquidation is final. Customs must liquidate entries within
one year of the date of entry unless Customs extends the period, which can not be more than
four years from the entry date.

B. Duty Determination Process

All imported goods that are entered into U.S. Customs territory must undergo a process
of duty determination, even if ultimately no duty is imposed. Duty determination in all cases is a
two step process– the classification of the imported goods to determine the duty rate of the
goods, and the appraisement of the goods to determine their monetary value. Once the goods
are classified and appraised, then the duty that is owed by the importer is calculated by
multiplying the duty rate times the appraised value. While the importer has the obligation to
make the proper duty determination and disclose that determination in the entry summary, the
Customs Service has the final say as to the duty owed, unless the importer is able to reverse a
Customs' duty ruling through a protest.

1. Classification of Imported Goods

The process of classification of imported goods is used to determine the good's duty
rate. This duty rate is ascertained by classifying the goods as to their country of origin, and
then, based upon that country of origin classification as well as the essential character of the
goods, selecting the proper category under the Harmonized Tariff Schedules of the United
States (HTSUS).

a. General Country of Origin Rule

In most instances, an imported good's country of origin is that country in which the good
last underwent a “significant transformation” of the good's “essential character.” Nearly all
imported goods are required to be marked as to their country of origin. A failure to properly
mark such goods can lead to their seizure by Customs. Those goods that are exempt from
marking are specified in what is called the J List.

b. NAFTA Country of Origin Rules

There are special Rules of Origin to determine whether to not an imported good is
entitled to NAFTA treatment.

c. HTSUS

The Harmonized Tariff Schedule (HTS) is the result of an attempt to internationally

harmonize the tariff (or duty) structure and classification of imported goods. The HTSUS,
enacted in 1989, is the U.S. implementation of the HTS. All goods are classified in the HTSUS
by a eight digit number (for example, leather cross-country ski gloves are classified as
4203.21.55). Goods are generally classified by their essential character; however, certain

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goods are classified by their use.

d. HTSUS Duty-Rate Categories

The HTSUS has two main duty-rate categories–

1) Most-Favored Nation (MFN) Status– is given to imports from countries who

have been granted MFN status pursuant to their membership in the GATT.
This rate is used for imports from most countries who are not communist or
otherwise embargoed. It is a greatly reduced rate from the statutory rate of
the Tariff Act of 1930 (the infamous Smoot-Hawley tariff).

2) Smoot-Hawley Tariff– the duty rate that, in essence, is the default rate if the
import is from a country that has not been granted MFN status or does not
otherwise qualify for any special duty-rate categories.

e. Special Duty-Rate Classifications

In addition to the above two categories, some imported goods receive special duty-rates
when they fall under one of the following categories. Note that country of origin rules vary from
category to category and therefore are very critical in determining whether an imported good is
eligible for a particular special duty-rate classification.

1) Generalized System of Preferences (GSP)–applies to imports from countries

who have been granted GSP status by UNCTAD and grants free duty on
imports from GSP countries except for certain specified goods.

2) Caribbean Basin Initiative (CBI)–applies to imports from countries who are

CBI members and grants free duty on imports from CBI members except for
certain specified goods.

3) U.S.-Israel Free Trade Area Agreement–applies to imports of Israeli origin.

4) NAFTA–applies to imports of Canadian and Mexican origin.

g. Special Duty Assessments

1) Antidumping duties– is an extra duty assessed after the U.S. determines that
a foreign-produced product is being “dumped” in the U.S. market.

2) Countervailing duties– is an extra duty assessed after the U.S. determines

that a foreign-produced product imported into the U.S. is being produced with
subsidies from the producer's government.

2. Appraisement of Imported Goods

The following methods are to be used, in descending order, to determine the value of
and imported good. Only if one method can not produce a value under that method is the next
method to be used.

a. Transaction value of actual imported goods

This method of valuation seeks to determine the actual price paid or payable for the

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imported goods. If certain items such as importer packing costs or selling commissions or seller
assists or not reflected in the price shown on the commercial invoice, then such
items must be added to that price to determine transaction value.

b. Transaction value of similar goods

If the transaction value of the actual imported goods can not be determined, then the
proper valuation method is to determine the transaction value of goods similar to those actually
imported. Factors that are used in determining this value include the actual exportation date of
the goods and the quantity of the goods sold.

c. Deductive value

If the transaction value of the actual imported goods or goods similar to those actually
imported can not be determined, then the deductive value of the imported goods must be
determined unless the person making the entry has designated the computed value as the
preferred valuation method. Deductive value is the resale price in the U.S. of the imported
goods, minus certain deductions.

d. Computed value

The computed valuation method is used if valuation of the imported goods can not be
determined by either transaction valuation method or the deductive valuation method, or if the
person making the entry has elected to choose this method. Computed value consists of the
sum of the materials and processing costs of the imported goods, the general expenses and
profit on the goods, the value of any seller assists for the goods, and the packing costs of
goods.

C. Importer Relief

The failure by an importer to properly follow the above procedures for clearance of
imported goods by U.S. Customs can result in a denial of entry, seizure and/or forfeiture of the
imported goods, and other various penalties and fines. Additionally, an importer, while fully
complying with required Customs procedures, nevertheless may also be damaged by what it
considers to be an incorrect Custom ruling on such matters as classification, appraisement and
the like.

Fortunately, there are several different avenues of relief that are available to importers
who believe that they have been damaged by a Customs Service action or ruling or would like
to request a Customs ruling on a particular matter. It is important to note that each one of these
forms of relief is uniquely related to a particular kind of Customs ruling. Quite often these forms
of relief are confused with one another. Choosing an improper form of relief can result in an
importer being denied the opportunity to challenge a particular Customs ruling. Therefore, it is
vital that the proper type of relief be chosen in order for the party requesting the relief to
preserve its right to challenge a particular ruling.

1. Petitions for Relief

Petitions for Relief are used by importers to request relief when Customs has engaged
in a punitive action such as seizing imported goods or imposing a penalty against an importer.
Petitions for Relief must be filed with the District Director for the Customs District where the
seizure occurred or where the penalty was imposed within 30 days of the mailing of the notice
of the seizure or penalty to the importer.

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2. Protests

Protests are used by an importer to protest Customs rulings regarding classification,

appraisement, exclusion, liquidation of duties and drawback refusals. Protests may be filed by
an importer, an importer's surety or any other party who has paid any duties on the particular
imported goods. Protests must be filed within 90 days following the issuance or notice of such
ruling with the District Director for the District in which the ruling is made or with the Port
Director if entry is made at a port other than the District headquarters port.

3. Administrative Rulings Requests

Requests for Administrative Rulings are used by importers to request that Customs
issue a ruling in regard to Customs laws and regulations as applied to a specific import
transaction over which Customs has jurisdiction. Administrative Rulings can be requested in
relation to specific prospective transactions, current transactions, or completed transactions.
Administrative Rulings Requests are filed either with the appropriate Customs office having
jurisdiction over the particular issue being raised, or with Customs headquarters in Washington.

4. Administrative Review

Administrative Review is used by an importer to request a review of Customs rulings

regarding reliquidations of duties, mistakes of fact or clerical errors. Requests for Administrative
Review must be filed with the District Director for the District in which the ruling was made
within one year of the issuance of the ruling.

5. Domestic Interested Party Petitions

Domestic Interested Party Petitions are used by importers as well as others such as
producers, manufacturers or associations to request a Customs ruling as to classification or
appraisement of certain types of imported goods. These Petitions must be submitted to the
Commissioner of Customs for review.

6. U.S. Court of International Trade

The U.S. Court of International Trade (CIT) has jurisdiction over all appeals of U.S.
Customs rulings and decisions that are eligible for review by law. In certain cases, a Customs
ruling or decision must first be appealed to the Secretary of the Treasury and then ruled upon
before the Court of International Trade will review it.

7. U.S. International Trade Commission

The U.S. International Trade Commission has jurisdiction over the final assessment of
antidumping and countervailing duties, and makes rulings on other unfair import trade
practices.

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